In July 2017, it received "approval from the U.S. Commodity Futures Trading Commission (CFTC) to trade and clear swaps and options on digital currencies," and it is "registered with the CFTC as a swap execution facility (SEF) and derivatives clearing organization (DCO)." It is also "the first federally regulated exchange and clearing house to list and clear fully-collateralized, physically-settled bitcoin swaps and options for the institutional market."

The Chicago Board Options Exchange (Cboe) has a volatility index called the "VIX Index". This is "a measure of expected future volatility that is implied by option prices." Here is how Cboe defines volatility:

"Volatility measures the frequency and magnitude of price movements, both up and down, that a financial instrument experiences over a certain period of time. The more dramatic the price swings in that instrument, the higher the level of volatility."

LedgerX says that since LXVX "incorporates the level of fear and uncertainty in the bitcoin market," we can think of it as "the 'bitcoin fear index,' in the same way the VIX is commonly referred to as a stock market fear index by market commentators."

Just like VIX, LXVX is based on implied volatility. Here is LXVX explaining the difference between realized volatility and expected volatility:

"Realized volatility calculations are based on historical data, providing the volatility that was experienced in an asset over a given timeframe. While realized estimates can be rough guidelines for expected future volatility, they are not nearly as thorough as implied volatility estimates. Implied volatility is the volatility that traders are pricing in for the future. Implied volatility will necessarily deviate from realized volatility as the market prices in different events. For example, if there is an expected ETF decision coming out, realized volatility would not capture the uncertainty of the event in the same way implied volatility does."

LXVX's underlying data is its "US federally-regulated bitcoin options data." LedgerX's Bitcoin options are "USD-denominated and physically settle into bitcoin, providing a reliable estimate for expected USD/BTC price volatility." Further details about how the LXVX is computed are available on the LedgerX website. Also, apparently, there is a white paper on LXVX that LedgerX plans to release soon.

Here is some of what LedgerX CEO, Paul Chau, has said so far on Twitter about LXVX:

as you allude to, the methodology is important -- it's counterintuitive but volatility exposure is not constant as the spot moves vs the fixed strikes of the underlying options, so you need a wide range of strikes for sure